Thursday, March 30, 2017

GDP-3rd Estimate … Unemployment Claims … Stock Market Analysis … Trading ETFs and ETF Ranking

GDP (MarketWatch)
“The U.S. grew slightly faster at a 2.1% pace in the fourth quarter and corporate profits rose again, offering further evidence that the economy entered 2017 on stronger footing than it did a year earlier.” Story at….
“The number of Americans filing for unemployment benefits fell less than expected last week, suggesting some loss of momentum in a labor market that continues to tighten. Initial claims for state unemployment benefits slipped 3,000 to a seasonally adjusted 258,000 for the week ended March 25…” Story at…
-Thursday the S&P 500 was up about 0.3% to 2368.
-VIX rose about 1% to 11.54.
-The yield on the 10-year Treasury rose to 2.415%. (Traders sold bonds and bought stocks.)
Late day action was up a little on the day and the 10-day average moved up giving a bullish indication. The small caps were very strong in late-day action and they often lead after a bottom. The Financials (XLF) were up 1.3%; Utilities (XLU) fell 0.8%; and bonds sold off.  These suggest investors are betting on a recovery in stocks rather than correction. VIX was up 1% so the options boys aren’t completely bullish. The Index has moved up to the downward trend-line marking the pullback so far.  The S&P 500 will need to move up in the next day or two or traders will get nervous.
My Sum of 16-Indicators slipped from -4 to -5 but longer term the curve is up so indicators are moderately bullish. New-High/New-low data is improving, but not following through with a bullish signal yet.
I remain short-term bullish; in the longer term I’m cautiously bullish - the longer term indicators are holding up reasonably well (except for Sentiment) so we’ll keep watching.
Recently (before today) the Financials (XLF) have been falling and my momentum rank hadn’t moved much. I looked back at some of the prior analysis and decided to use my older version of the Momentum System. Up until last week, the two versions were nearly identical.
The top ranked ETF receives 100%. The rest are then ranked based on their momentum relative to the leading ETF.  While momentum isn’t stock performance per se, momentum is closely related to stock performance. For example, over the 4-months from Oct thru mid-February 2016, the number 1 ranked Financials (XLF) outperformed the S&P 500 by nearly 20%.
*For additional background on the ETF ranking system see NTSM Page at…
I would avoid iEAFE (Europe and Far East) & XLE; currently their 120-dMAs are declining.
Recommended ETF Portfolio of top 3:
1. Technology Select Sector SPDR ETF (XLK)
2. Schwab emerging Markets (SCHE)
3. SPY, IBB, XLY, and XLV are all essentially tied for third*.
*XLU was actually 3rd, but I am not inclined to recommend it unless it appears a defensive position is required – XLU was down 0.8% today. Financial Select Sector SPDR (XLF) is close enough to own if one believes that interest rates will rise. XLF was up 1.3% today.
(I took positions in XLF and XLK Wednesday, 29 March.)
As we guessed yesterday, Financials were the big winner for the day and Utilities were the big loser.
SHORT-TERM TRADING PORTFOLIO - 2017 (Small-% of the total portfolio)
I closed all remaining short positions on 3/28/2017.  My losses were big enough that I am too embarrassed to list them here.
- Rydex S&P 500 2x Strategy. Established 3/28/2017
- 2x S&P 500 ETF (SSO). Established 3/28/2017
-“In a bull market, you can only be long or neutral.” – D. Gartman
-“The best policy is to avoid shorting unless a major bear market is underway and downside momentum has been thoroughly established. Even then, your timing must sometimes be perfect. In a bull market the trend is truly your friend, and trading against the grain is usually a fool's errand.” – Clif Droke.
 “There are two kinds of forecasters. Those who don’t know, and those who don’t know they don’t know.”- John Kenneth Galbraith.
Market Internals remained Neutral on the market.
Market Internals are a decent trend-following analysis of current market action, but should not be used alone for short term trading. They are usually right, but they are often late.  They are most useful when they diverge from the Index.  In 2014, using these internals alone would have made a 9% return vs. 13% for the S&P 500 (in on Positive, out on Negative – no shorting). 
Thursday, Sentiment was negative (Bullishness is at an extreme.); Price, Volume & VIX indicators were neutral.
I increased stock allocation to 50% stocks in the S&P 500 Index fund (C-Fund) Friday, 24 March 2017 in my long-term accounts, based on short-term indicators. Remainder is 50% G-Fund (Government securities). This is a conservative retiree allocation based mostly on low volume at the test of the recent bottom.
There have been no long-term Buy or Sell signals in a while.  The last signal was a BUY on 23 February and the last actionable signal was a BUY (from a prior sell) on 15 November 2016.